Consumption differentiation intensifies, dairy companies compete for the high-end market, and technological innovation is still the key to the competition

Author | Caijing New Media Writer Shu Zhijuan Editor | Gao Suying

"The original 300 yuan/can of milk powder is considered high-end, and now four or five hundred yuan of milk powder is becoming more and more common, and these high-end milk powders have added more nutrients without exception, and scientific research and innovation have become the key to the competition." Liu Hao, a distributor who acts as an agent for a number of milk powder brands, said.

Recently, more and more dairy companies have begun to increase the high-end market segment, among them, Ausnutria's brand Jiabei Aite has targeted three infant formula goat milk powders in the high-end market, namely Xinjinghua, Jingcui Yuebai and Yueqi, while Junlebao, Yili and Biostime are not to be outdone, and have increased their investment in the field of subdivided high-end milk powder.

It is worth noting that with the emergence of the phenomenon of consumption grading, the differentiation of consumption structure is intensifying, "low price" is no longer the first choice of consumers, and the high-end market spawned by consumption upgrading has received unprecedented attention. According to the data, global sales of high-end consumer goods will increase by 8% to 10% in 2023, with a total of 1.5 trillion euros, compared with a related increase of 22% in 2022.

Although the high-end market is becoming the main battlefield for leading enterprises, the competition in the high-end market has also brought the challenge of product homogenization. Under the same price and similar formula, how to highlight the uniqueness and difference of products has become a problem that milk powder companies need to think about.

Consumption patterns have given rise to a trend of premiumization

The author found that high-end milk powder is mainly divided into two categories, with the addition of various classified concept products and organic milk powder. Among them, the addition of various nutritional components is the most common, and the newly launched three infant formula goat milk powders, namely Jinghua, Jingcui Yuebai and Yueqi, emphasize its unique goat milk small molecule and lactoferrin and other nutrients; Junle Bao Tianshi Kangmin Milk Powder adds part of the hydrolyzed whey protein formula, and Yili Gold Lingguan Zhenhu Jingci Milk Powder adds organic active protein OPN.

Not only that, under the premise of science, each company is constantly improving the content of beneficial nutrients. Among them, lactoferrin, as a key nutrient that has attracted much attention in the past two years, has undergone significant changes in the addition of lactoferrin to milk powder.

The data shows that compared with the old national standard, the proportion of lactoferrin added in the new national standard has increased significantly from 29.2% to 49.3%, showing that the industry attaches great importance to this nutrient. At the same time, the average amount of lactoferrin added has also increased, from 49.8 mg/100 g to 70 mg/100 g. It is worth mentioning that the lactoferrin content of Jiabei Aite Crystal is 75 mg/100 grams, and the lactoferrin content of brands such as Junlebao and Yili also exceeds the industry average.

In fact, this wave of "involution" is inseparable from the new national standard of "the strictest in history" milk powder. In the past year since the implementation of the new national standard, it has not only improved the production standards of infant formula, but also accelerated the elimination of small and medium-sized brands. According to the data of the State Administration for Market Regulation, up to now, a total of 1,127 registered formulas have been approved, including 926 domestic and 201 overseas, 441 formulas have not been registered or have not passed the review, and a total of about 20 companies have not submitted or revoked registration applications.

At the same time, this change is also related to the transformation of consumer groups in the milk powder market. In the view of milk powder distributor Liu Hao, the main consumer groups in the milk powder market are post-90s and post-95 mothers, who have higher requirements for the quality of milk powder and are relatively insensitive to price. This change in consumption concept has promoted the trend of high-end development of the milk powder market.

Liu Hao further said that with the rise of e-commerce platforms and live streaming platforms, the cost of customer acquisition is also rising. If a product wants to get good traffic exposure on the live broadcast platform, the manufacturer may need to invest hundreds of yuan per can. Therefore, milk powder brands are more inclined to create high-end and ultra-high-end products to ensure the enhancement of brand image and have enough funds to invest in product research and development. This marketing strategy has also further promoted the high-end trend of the milk powder market.

Technological innovation has become a "killer feature" in the high-end market competition

However, it is becoming more and more difficult to maintain a high-end image by adding various ingredients, and companies need to really improve their technological research and development capabilities in order to be recognized by consumers. Not only that, but high-end milk powders tend to be similar in price point and formula, which makes it difficult for consumers to distinguish the advantages and differences between different brands. Therefore, milk powder companies need to think carefully about how to improve the uniqueness and differentiation of their products to attract and retain consumers.

In this context, leading enterprises have increased R&D investment and continuously innovated to improve their competitiveness. Among them, Jiabei Aite has set up a Jiabei Aite Nutrition Research Fund, with an annual investment of 1 million yuan to support domestic experts and scholars in the medical field to carry out project research on pregnancy health and nutrition, infant intestinal health, etc., and cooperate with domestic and foreign universities to establish relevant databases to provide a basis for overall formula optimization.

Junlebao invested 500 million yuan to build a scientific nutrition research institute, and established a scientific strategy think tank, infant nutrition research global scientific expert committee and other platforms, and cooperated with domestic and foreign institutions and experts to carry out all-round in-depth research and development; From 2018 to 2023, Feihe's R&D investment will grow at a compound annual growth rate of 41%.

Jiabei Aite said that with the slowdown in the growth rate of the infant formula industry and the advent of the era of stock competition, the milk powder industry will develop in the direction of higher quality, which also means that brands without strong product research and development strength and industrial upgrading capabilities will face the risk of being eliminated.

The relevant person in charge of Junlebao milk powder pointed out that the state has tightened the supervision of the industry, the industry access threshold has been tightened, and the market will accelerate the concentration of leading enterprises with technical and product advantages, so that the entire industry will be more healthy, standardized and orderly.

"From the perspective of industry development trends, the infant formula market has become saturated, and it is unlikely that it will grow significantly." Song Liang, an independent dairy analyst, believes that this year is the year of repair of the milk powder value chain, and the milk powder industry has made efforts to the high-end market and upgraded the formula, not only to stabilize the market price system and improve channel profits, but also to enhance the brand image and show the scientific and technological level and scientific research strength of the enterprise.

Zhao Heng, a senior partner of Shanghai Ruinong Consulting, told the author that in the future, high-quality formula will become the development orientation of infant formula milk powder, which requires milk powder companies to promote the healthy development of the industry only by returning to product value orientation.